Is Getting Involved with Retail Arbitrage a Good Idea?

AlexJune 4, 2013

You’re walking around a local shop admiring all the hand crafted goods when you spot a particular necklace. You stare at it for a minute trying to figure out why you recognize it & suddenly it hits you, you just saw them on eBay for way more money than they’re selling them at this shop.

You start to wonder – could you do the same thing? Could I buy this necklace for $50 and sell it online for a huge profit? There’s nothing outright preventing this, right? So you buy one to test the waters and end up making $100 profit off the transaction. You can’t believe your luck!

But you start to wonder if what you did was illegal in some way. You had to have broken some rule, right? It seems like this kind of thing can’t be totally in the straight and narrow.

Legality

In fact, retail arbitrage has been a hot topic ever since it first came into vogue years ago. eBay and other online sellers everywhere started to realize that not every single item is available online yet. As a result, they started buying items that were obscure, hard to find, or odd like shoes in weird sizes. They would then turn around and sell these for a profit through their own store.

Retail arbitrage isn’t nearly as popular as it once was, especially since most items are now available online at some point. Plus, suppliers caught on to the deal and started shrinking margins so hardly any profit could be made for the reseller. It isn’t completely dead, though, as recent events have proven.

Just this year, the Supreme Court got involved and informed manufacturers they cannot sue online sellers who engage in retail arbitrage. However, don’t expect this to be the end of the argument. Many resellers buy stuff in bulk to sell online but these transactions may come with stricter guidelines and contracts.

However, the case did prove it’s not illegal for you to resell items in this way unless you’re breaking some specific contract. For example, unless you have a contract with Nike to sell their shoes, you may get into some hot water as they require contracts for authorized distribution.

Morality

Ok, so it’s all good and legal, so you go ahead and buy up some more necklaces to resell online. In the back of your mind, though, you start feeling a little guilty. You feel like you should at least talk to the store owner or something about what you’re doing. What’s that all about? It’s just business, right?

You can look at this in many different ways, but here are the two extremes: on one hand you’re exposing this store’s goods to the rest of the world and enjoying the benefits of knowing how the system works. On the other hand, though, you’re not only denying the shop organic business you’re also using them strictly to make money. Sure, you give them business, but it’s not business that will grow their little store as you’re making money off their hard work.

There’s no real strict final answer here, by the way, not unless the Supreme Court changes their mind. If you want to get involved with retail arbitrage, try to keep in mind not everyone is going to love what you do. If you ever run into trouble, it’s best to err on the side of caution.

What do think about retail arbitrage? Do you participate in it or know someone who does?